The mining sector has experienced growth recently

THE growth of the mining sector in South Africa over the past year has exceeded expectations but economists have warned the industry is by no means out of the woods.

Growth in mining production accelerated to 3,1 percent year-on-year (y‐o‐y) in February from 2,9 percent in January (2018).

This was bolstered mainly by production of diamonds, which increased by 42,9 percent and added 2 percentage points.

On a seasonally adjusted basis mining production increased by 0,9 percent month-on-month (m‐o‐m) in February and declined by 2,4 percent quarter-on-quarter (q‐o‐q) for the three months to February.

The biggest contributors to the seasonally adjusted increase were coal and manganese ore, which added 5 percentage and 1,4 percentage points respectively.

“Mining figures are volatile,” Nedbank economists, Dennis Dykes and Nicky Weimar, commented. However, stronger global demand and firmer international commodity prices are expected to support production and exports in 2018, the economists stated.

Dykes and Weimar further forecast, “The upside will still be tempered by a generally difficult operating environment.”

Absa Capital also highlighted mining output rose more than expected in February.

Economists Miyelani Maluleke and Peter Worthington said however, both the January and February mining prints were launched off a low December base. Thus, they argued despite increased output in the first two months of this

year, South Africa’s average seasonally adjusted mineral output so far in 2018 sits 1,1 percent below the average of the fourth quarter of 2017.

This suggests the sector could subtract from gross domestic product in the first quarter.

“…unless March delivers an exceptional increase,” Maluleke and Worthington stated.

Rand Merchant Bank (RMB) also pointed out while mining production rose above “our and consensus expectations” for 2,2 percent growth.

Isaiah Mhlanga of RMB said however, despite the above-expectation performance, the trend remained weak, as gold and platinum production continued to detract from overall output.

“The sector is likely to subtract from overall GDP in the first quarter of 2018 if the year-to-date trend is maintained in March,” Mhlanga, the RMB economist stated.

The mining industry contributed positively to South Africa’s GDP growth in 2017.

Mining’s growth was spurred on, in part, by increased production of manganese ore, chrome, and iron ore, according to Stats South Africa.

Rising demand for minerals used in the production of steel contributed to the increases.

Mining remains an important player in the South African economy, contributing 8 percent of the national economy and employing 2,5 percent of the entire workforce.

The industry is the largest in four of South Africa’s nine provinces. – CAJ News

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